Power utility Cemig, part of a consortium that won the Santo Antonio plant concession in December, also said on Tuesday that despite higher costs, it maintained an expected rate of return on investment at 12 percent or more.
RIO DE JANEIRO (Reuters) - The estimated investment in Brazil's first big power plant project on the Madeira river in the Amazon has gone up to 12.2 billion reais ($7.4 billion) from the initial government estimate of 9.5 billion reais.
Power utility Cemig, part of a consortium that won the Santo Antonio plant concession in December, also said on Tuesday that despite higher costs, it maintained an expected rate of return on investment at 12 percent or more.
On Monday, in a tender of the second phase of the Madeira project called Jirau, the consortium lost to another group led by French utility Suez.
The government's EPE energy planning agency estimated the Jirau project to cost about 8.7 billion reais ($5.3 billion). Analysts say the Jirau is less pricey than the Santo Antonio as it uses cheaper vertical waterfall turbines, but also expect costs for it to climb higher.
!ADVERTISEMENT!"We cannot judge the estimates made by the (Suez-led) Jirau consortium because we don't know what criteria they used. But we're absolutely certain that our (Santo Antonio) budget is 12.2 billion reais," Cemig financial director, Luiz Fernando Rolla, told a conference call.
EPE's initial projection for Santo Antonio was 9.5 billion reais.
Cemig said the first two turbines of Santo Antonio should come on stream in April 2012, before the previously expected start in December that year.
The Santo Antonio consortium also includes an investment fund set up by Spain's Santander and Portugal's Banif, Furnas, a subsidiary of Brazil's federal power holding Eletrobras and construction giants Odebrecht and Andrade Gutierrez.
Brushing off market skepticism about returns on investment in the Madeira River projects, Rolla said the rate would be boosted by Brazil's recently acquired investment grade rating, which means lower borrowing costs.
An analyst, who did not want to be identified, expressed his doubts after the call: "For this return rate, everything has to work out 100 percent fine, and that is very difficult, especially in that region," he said, citing possible court challenges by environmental groups and climatic factors.
Cemig stocks edged up 0.27 percent on Tuesday to 37.8 reais.
($1=1.65 reais)
(Reporting by Denise Luna, writing by Andrei Khalip; Editing by Marguerita Choy)
